What is Amazon FBA and How Does it Work?

You order your supplier to ship to an Amazon warehouse in your local market

Amazon then picks, packs, ships, and provides customer service for these products

It’s as simple as that.

You don’t need to store the products yourself, you don’t need to label and organise them yourself and you don’t need to ship them. Amazon takes care of everything from the moment the product arrives at their warehouse.

Why is this so powerful?

It allows sellers like Riley to manage his business completely online with no physical operations, leaving him to travel the world while Amazon handles his shipments. All he has to do is make sure his product listing is well-optimised and that he continues to ship new stock to Amazon whenever inventory is low.

Alibaba to Amazon: The Amazon Method in a Nutshell

You can think of Alibaba as an easy way to look up and contact Chinese suppliers of physical products. While Amazon represents your hub for the retail side of your business, Alibaba is your hub for the supplier side.

With Alibaba, you can search for your product ideas or browse through categories of thousands of products available for ordering from Chinese wholesale suppliers.

Searching through Amazon’s website to see what products are hot, and then

Look up suppliers of that product on Alibaba

Once you’ve found a product opportunity on Amazon and a supplier on Alibaba, you’ll begin to ship the product from Alibaba to Amazon and sell the product through your own listing on Amazon.com.

It’s a basic system to understand but the implementation is where the difficultly comes in.

Not to worry though, as I’m about to break down Riley’s system into a step-by-step process which you can use to create your own Amazon FBA business.

Let’s get started!

Step 1: Product Research

Product Research is the most important and longest step in the Amazon Method process. This is the step that will make or break your business and Riley suggests that you take a whole month to complete this step.

He stresses this point as a lot of new sellers make the mistake of trying to make their product idea completely unique to the point that there is no demand for such a product.

The key principle of this stage is to find what is already selling well on Amazon and then come in with your own version of that product.

1.1 Start with the Bestselling products

We’ll cover how to make your own version stand out in just a little bit but first, let’s look at the list of products already selling well on Amazon. You can find these products on Amazon’s best seller page, hidden on inconspicuous web address, www.amazon.com/Best-Sellers/zgbs

The Front Page of Amazon Bestsellers

Riley suggests that you use this page to begin your search for product opportunities, drilling down on each product category to find best selling products in various niches.

As you comb through the pages and pages of Amazon’s best selling products you’ll want to quickly evaluate each of them in terms of the following criteria.

Are the products produced by big brands? These products will be much harder to compete with

Are they easily produced? Something like a high-tech gadget might require research and engineering and is more likely to break or malfunction

How many reviews do the top products have? Do they have good photos and/or titles? Products will less reviews and poor images and titles are easier to compete with

This quick criteria is a preliminary checklist that help to prevent you looking too deep into products with little opportunity for small sellers like yourself.

1.2 Make a Search for your Idea

Once you’ve found a product idea which you think has potential, make a search for that product using the search bar at the top of the page. For instance, if you think phone lenses might be a good product opportunity, type ‘phone lenses’ into the search bar.

The reason why you need to search for your product idea is due to the way that most of your customers will find your product. Amazon is like ‘the Google’ of product search. In fact, more people search for products on Amazon than they do Google itself. This means that performing a search like the one you’re making right now is how you can expect your customers to find you.

Once you’re on the search page, you can use a free tool called ‘Unicorn Smasher‘ to analyse the products on the first page for that search term and give you relevant data with which you can assess the profitability and competition for that term.

Unicorn smasher in action

The first metric you want to look for is Estimated Sales. This is important for determining how lucrative that product is. According to ‘The Amazon Method‘, you should aim to sell a minimum of 300 units per month with a product retail value of $20 to $50.

The second most important metric is the number of reviews that the top sellers have. This metric is a strong indicator of how difficult it will be for a new seller to come in and compete with the existing sellers. Riley tends to look at 100 reviews or less as an indicator that you could realistically compete with the other sellers.

You may be wondering at this point, ‘How do I compete with all the exisiting sellers?‘ Riley answers this question in the masterclass by stating his major key to success – Be Unique!

This is something Riley covers in-depth within the full course of ‘The Amazon Method‘ but during the masterclass he describes being unique as having a feature or benefit that none of the other products have.

To complete this step, Riley suggests you create a spreadsheet of 30 product ideas, listing for each them, the level of sales and reviews of your future competition.

Step 2: Sourcing your Product on Alibaba

Once you have your list of product ideas, it’s time to start your search for a supplier.

First, head to Alibaba.com and insert your first search term. Following the previous example, let’s search for ‘phone lenses’.

Search results page for ‘Phone Lenses’ on Alibaba.com

If you’ve done your research well and have chosen an in-demand product, you should now start to see hundreds or thousands of products being offered by suppliers.

Evaluate each supplier by the quality of the product, the price each piece and the minimum order and make a shortlist of around 3 suppliers with whom you might want to work with. Then, contact them direct through Alibaba and order a sample of the product from each.

Once you receive the samples, make a final decision on which supplier you want to go with and request a ‘test order‘ of about 200 units for them to ship directly to Amazon.

Step 3: Get Quick Reviews to Get in the Game

In this Masterclass, we won’t cover the technical side of setting up your listing as this is information you can easily find online. Instead, we’re going to cover the third most important step of the process: getting reviews.

Up until late 2016, Amazon allowed sellers to send out coupon codes of up to 90% off in order to attract new buyers. Unfortunately, this strategy is no longer viable. However, Riley reveals in a later video that sales promotions of up to 50% off are still allowed on Amazon. Any more than 50% and Amazon will mark the reviews that come from promotion as unverified.

But how do you put your 50%-off promotions in front of potential buyers?

Riley recommends joining relevant Facebook groups within your niche and announcing your new product (with the discount) inside them. Obviously, you’ll want to check the rules of the group so that you’re not spamming people but otherwise, you should hope to find a fewer buyers in this way.

As a warning, do not tell your buyers that they must leave a review for the product as this is against Amazon’s terms of service. Instead, you can message them a few weeks after they have ordered the product and ask them nicely to review the product. The customer should never feel like they have to leave a review but you are allowed to give them a little push.

Why is this step so important?

Well, in terms of competing with the other listings, reviews are your primary way that you can differentiate from the other sellers. Yes, the title, the images and the description of your listing are important but these aspects won’t save a product with no reviews. On Amazon, reviews are king and you must respect them in order to succeed.

Step 4: Rinse and Repeat

If your test order is successful, it’s now time to order more.

Apart from re-ordering more stock each time your inventory is low, the only maintenance required is a little bit of customer service and a dedication to optimising your product listing over time.

As you might imagine, the maintenance stage does not require a lot of ongoing work and leaves you with a lot of time to search for your next product opportunity and build your brand even further.

Benefits of Selling on Amazon

Riley ends the masterclass by sharing why selling on Amazon is such an attraction business model for many entrepreneurs.

1. You’re building your own brand

With ‘The Amazon Method‘, you’re not selling other people’s products, you’re doing instead what’s called ‘Private Labeling’. This means that your brand can become an asset, you have full control over the price of the product and are able to sell your business more easily when you have some consistent cash-flow.

2. Amazon handles the heavy-lifting

As previously mentioned, you don’t have to manage any of the physical operations of your business when you use Amazon FBA. This means that the income you earn from your business requires little labour and you can sit back as your sales come in every day, choosing to work when you want to.

Where can I learn more?

Yes, this masterclass was a little brief and unfortunately, we were unable to cover the nitty-gritty of selling on Amazon. I hope however, that you’ve gotten a good overview of the process and whether it’s something you might want to pursue yourself.